What Is a Registered Retirement Income Fund (RRIF)?
A RIF refers to the various retirement accounts that individuals can open, with a registered retirement income fund (RRIF) being one of them. Like an annuity, a RRIF pays out money to one or more beneficiaries over time. When it’s time to withdraw from your RRSP, you have the option to withdraw it in cash, elect an annuity, or convert it into a RIF. Keep in mind that RIFs require payments, and there are minimum and maximum amounts set every year in Canada based on age.
Setting up an RRIF account can be done through a financial institution, and you can convert your RRSP into a RRIF before the end of the year in which you turn 71. You’ll be subject to the minimum income rules once you start receiving income, and you don’t have to withdraw any income until the year you turn 72.
Withdrawals from your RRIF will be determined by your age and life expectancy, and you’ll pay income tax on your investment options when you make withdrawals. If you don’t need the cash immediately, there are ways to make the most of your withdrawals, such as contributing after-tax money into a tax-free savings account.
When transferring your funds into an RRIF, you can transfer assets from your RRSP savings, RRIF, or any other Canadian retirement vehicle that offers RIFs. It’s important to be aware of withdrawal limits and options available when considering converting your RRSP to a RRIF.
The benefits of a RRIF include flexibility in setting up an income stream during retirement, as well as the growth of your investment without taxation until you withdraw it. If you have any questions about RRIFs and investment growth, an Experior Financial Group associate can help.
FAQ
- What is a Life Income Fund (LIF)?
A LIF is a retirement income fund that operates similarly to a RRIF, but it has both a minimum and a maximum withdrawal limit. It provides you with the flexibility to withdraw funds from your investments for any purpose. However, you can only convert your pension funds to a LIF once you reach the minimum age required by your Canadian province. - How much do you need to withdraw from your RRIF each year?
The minimum income amount you must withdraw depends on your age. The Canadian government implemented a new minimum income schedule in the 2015 Federal Budget. Due to the COVID pandemic, the minimum required withdrawal for all types of registered retirement income funds (RRIFs) was reduced by 25% in 2020. - What is the difference between a RIF and a LIF?
A LIF requires a minimum payment amount to be withdrawn annually, while an RRIF allows you to control your investments throughout your entire lifetime. With an RRIF, you can defer making withdrawals from your registered retirement savings plan (RRSP) until you retire. - What is the difference between a RIF and a RRIF?
A retirement account comes in many different forms, and a Registered Retirement Income Fund (RRIF) is one of them. It is subject to many rules. - What is the minimum withdrawal from a RRIF in 2021?
The minimum withdrawal amount for 2021 depends on your age. You can find the table showing the minimum withdrawal amounts for RRIFs on the official Canada Revenue Agency (CRA) website under “Minimum withdrawal factors for registered retirement income funds.” - What is a locked-in retirement fund?
A locked-in retirement account (LIRA) is a special type of registered retirement savings plan designed to preserve and protect pension benefits. - Can you withdraw from a locked-in retirement account?
The funds in a LIRA are locked-in and can only be used to provide a retirement income. Thus, the amounts cannot be withdrawn until you retire. However, there are exceptions to this rule, which require proving financial hardship and doing a lot of paperwork. - How much retirement income does $500,000 generate?
The amount of retirement income generated by $500,000 depends on various factors that differ from person to person. Our team of experts can help determine the right amount for you and the situation you want to be in when you retire. It is worth noting that $500,000 may seem like a large sum, but when divided over months and years, it can deplete quickly.